H-P Seeking to Sell Stake in India’s MphasiS

Hewlett-Packard is looking to exit medium-sized Indian software firm MphasiS Ltd. in a deal that the U.S. tech company hopes will fetch at least $1 billion, a person familiar with the matter said late Friday.

H-P’s advisers have approached several Indian outsourcing companies as well as private-equity firms to buy its stake but none have evinced interest yet, the person said. The talks are at an early stage, this person added.

H-P did not respond to a query for comment. A spokeswoman for MphasiS declined to comment.

H-P owns nearly 60.5% of the 210 million outstanding shares in MphasiS. The U.S. company got ownership in the Indian software exporter in 2008, when it bought Electronic Data Systems Corp.–MphasiS’ then parent.

“H-P wants to exit because its investment in MphasiS has been deemed non-core by the U.S. firm,” the person familiar with the discussion said.

Due to legal and tax rules, H-P has to pay its Indian unit similar or higher prices than what it would pay unrelated third-parties for outsourcing work — which makes it less cost-effective than originally hoped, the person added.

H-P is the largest client for MphasiS, accounting for more than half of the Indian company’s nearly $1 billion revenue in the last fiscal year ended in October.

Private-equity firms that have been approached for MphasiS stake purchase include Advent International, Bain Capital LLC Carlyle Group LP and Blackstone Group LP, the person familiar with the matter said.

A spokesman for Carlyle declined to comment. Representatives of Advent, Bain Capital and Blackstone didn’t respond to queries.

Spokespersons for Cognizant, TCS and Tech Mahindra declined to comment. A spokesman for L&T Infotech wasn’t immediately available for a comment.

The person familiar with H-P’s stake sale process said that MphasiS Chief Executive Ganesh Ayyar and founder Jerry Rao are also separately trying to form consortiums to fund a management buyout of the H-P stake, in partnership with some of the private equity firms.